EXHIBIT 4.21
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND IS
BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THIS SECURITY MAY NOT BE SOLD
OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS.
7 3/4 % CONVERTIBLE DEBENTURE
Company: Peabodys Coffee, Inc.
Company Address: 0000 Xxxxxxxx Xxxx, Xxxxx 0, Xxxxxxx, XX 00000
Closing Date: December ___, 2003
Maturity Date: December ___, 2005
Principal Amount: $250,000
First Payment Due Date: January 15, 2004
Peabodys Coffee, Inc., a Nevada corporation, and any successor or
resulting corporation by way of merger, consolidation, sale or exchange of all
or substantially all of the assets or otherwise (the "Company"), for value
received, hereby promises to pay to the Holder (as such term is hereinafter
defined), or such other Person (as such term is hereinafter defined) upon order
of the Holder, on the Maturity Date, the outstanding Principal Amount (as such
term is hereinafter defined), as such sum may be adjusted pursuant to Article 3,
and to pay interest thereon from the Closing Date, monthly in arrears, on the
15th day of each month (each an "Interest Payment Due Date" and collectively,
the "Interest Payment Due Dates"), commencing on the First Payment Due Date, at
the rate of seven and three-quarters percent (7 3/4 %) per annum (the "Debenture
Interest Rate"), until the Principal Amount of this Debenture has been paid in
full. All interest payable on the Principal Amount of this Debenture shall be
calculated on the basis of a 360-day year for the actual number of days elapsed.
Payment of interest on this Debenture shall be in cash. Subject to Section 2.5
below, this Debenture may not be prepaid without the written consent of the
Holder.
ARTICLE 1
DEFINITIONS
SECTION 1.1 Definitions. The terms defined in this Article whenever
used in this Debenture have the following respective meanings:
(i) "Affiliate" has the meaning ascribed to such term in Rule
12b-2 under the Securities Exchange Act of 1934, as amended.
(ii) "Bankruptcy Code" means the United States Bankruptcy Code
of 1986, as amended (11 U.S.C.ss.ss.101 et. seq.).
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(iii) "Business Day" means a day other than Saturday, Sunday
or any day on which banks located in the State of California are
authorized or obligated to close.
(iv) "Capital Shares" means the Common Stock and any other
shares of any other class or series of capital stock, whether now or
hereafter authorized and however designated, which have the right to
participate in the distribution of earnings and assets (upon
dissolution, liquidation or winding-up) of the Company.
(v) "Common Shares" or "Common Stock" means shares of the
Company's Common Stock.
(vi) "Common Stock Issued at Conversion", when used with
reference to the securities deliverable upon conversion of this
Debenture, means all Common Shares now or hereafter Outstanding and
securities of any other class or series into which this Debenture
hereafter shall have been changed or substituted, whether now or
hereafter created and however designated.
(vii) "Conversion" or "conversion" means the repayment by the
Company of the Principal Amount of this Debenture (and, to the extent
the Holder elects as permitted by Section 3.1, accrued and unpaid
interest thereon) by the delivery of Common Stock on the terms provided
in Section 3.2, and "convert," "converted," "convertible" and like
words shall have a corresponding meaning.
(viii) "Conversion Date" means any day on which all or any
portion of the Principal Amount of this Debenture is converted in
accordance with the provisions hereof.
(ix) "Conversion Notice" means a written notice of conversion
substantially in the form annexed hereto as Exhibit A.
(x) "Conversion Price" on any date of determination means the
applicable price for the conversion of this Debenture into Common
Shares on such day as set forth in Section 3.1(a).
(xi) "Current Market Price" on any date of determination means
the closing price of a Common Share on such day as reported on the
NASDAQ OTCBB Exchange; provided that, if such security is not listed or
admitted to trading on the NASDAQ OTCBB, as reported on the principal
national security exchange or quotation system on which such security
is quoted or listed or admitted to trading, or, if not quoted or listed
or admitted to trading on any national securities exchange or quotation
system, the closing bid price of such security on the over-the-counter
market on the day in question as reported by Bloomberg LP or a similar
generally accepted reporting service, as the case may be.
(xii) "Deadline" means the date that is the 120th day from the
Closing Date.
(xiii) "Debenture" or "Debentures" means this 7 3/4 %
Convertible Debenture of the Company or such other convertible
debenture(s) exchanged therefor as provided in Section 2.1.
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(xiv) "Discount Multiplier" has the meaning set forth in
Section 3.1(a).
(xv) "Event of Default" has the meaning set forth in Section
6.1.
(xvi) "Holder" means La Jolla Cove Investors, Inc., any
successor thereto, or any Person to whom this Debenture is subsequently
transferred in accordance with the provisions hereof.
(xvii) "Interest Payment Due Date" has the meaning set forth
in the opening paragraph of this Debenture.
(xviii) "Market Disruption Event" means any event that results
in a material suspension or limitation of trading of the Common Shares.
(xix) "Market Price" per Common Share means the lowest price
of the Common Shares during any Trading Day as reported on the NASDAQ
OTCBB; provided that, if such security is not listed or admitted to
trading on the NASDAQ OTCBB, as reported on the principal national
security exchange or quotation system on which such security is quoted
or listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation
system, the lowest price of the Common Shares during any Trading Day on
the over-the-counter market as reported by Bloomberg LP or a similar
generally accepted reporting service, as the case may be.
(xx) "Maximum Rate" has the meaning set forth in Section 6.4.
(xxi) "Outstanding" when used with reference to Common Shares
or Capital Shares (collectively, "Shares") means, on any date of
determination, all issued and outstanding Shares, and includes all such
Shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in such Shares; provided, however,
that any such Shares directly or indirectly owned or held by or for the
account of the Company or any Subsidiary of the Company shall not be
deemed "Outstanding" for purposes hereof.
(xxii) "Person" means an individual, a corporation, a
partnership, an association, a limited liability company, an
unincorporated business organization, a trust or other entity or
organization, and any government or political subdivision or any agency
or instrumentality thereof.
(xxiii) "Principal Amount" means, for any date of calculation,
the principal sum set forth in the first paragraph of this Debenture
(but only such principal amount as to which the Holder has (a) actually
advanced pursuant to the Securities Purchase Agreement (b) not
theretofore furnished a Conversion Notice in compliance with Section
3.2).
(xxiv) "Registration Rights Agreement" means that certain
Registration Rights Agreement of even date herewith by and between the
Company and Holder, as the same may be amended from time to time.
(xxv) "SEC" means the United States Securities and Exchange
Commission.
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(xxvi) "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC thereunder, all as in
effect at the time.
(xxvii) "Securities Purchase Agreement" means that certain
Securities Purchase Agreement of even date herewith by and among the
Company and Holder, as the same may be amended from time to time.
(xxviii) "Subsidiary" means any entity of which securities or
other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are owned directly or indirectly by the Company.
(xxix) "Trading Day" means any day on which (i) purchases and
sales of securities on the principal national security exchange or
quotation system on which the Common Shares are traded are reported
thereon, or, if not quoted or listed or admitted to trading on any
national securities exchange or quotation system, as reported by
Bloomberg LP or a similar generally accepted reporting service, as the
case may be, (ii) at least one bid for the trading of Common Shares is
reported and (iii) no Market Disruption Event occurs.
(xxix) "Warrant" means the Warrant to Purchase Common Stock of
even date herewith by and between the Company and Holder, as the same
may be amended from time to time.
All references to "cash" or "$" herein means currency of the
United States of America.
ARTICLE 2
EXCHANGES, TRANSFER AND OPTIONAL REDEMPTION
SECTION 2.1 Registration of Transfer of Debentures. This Debenture,
when presented for registration of transfer, shall (if so required by the
Company) be duly endorsed, or be accompanied by a written instrument of transfer
in form reasonably satisfactory to the Company duly executed, by the Holder duly
authorized in writing.
SECTION 2.2 Loss, Theft, Destruction of Debenture. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Debenture and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security reasonably satisfactory to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Debenture, the Company shall make, issue and deliver, in
lieu of such lost, stolen, destroyed or mutilated Debenture, a new Debenture of
like tenor and unpaid Principal Amount dated as of the date hereof. This
Debenture shall be held and owned upon the express condition that the provisions
of this Section 2.2 are exclusive with respect to the replacement of a
mutilated, destroyed, lost or stolen Debenture and shall preclude any and all
other rights and remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without the surrender thereof.
SECTION 2.3 Who Deemed Absolute Owner. The Company may deem the Person
in whose name this Debenture shall be registered upon the registry books of the
Company to be, and may treat it as, the absolute owner of this Debenture
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(whether or not this Debenture shall be overdue) for the purpose of receiving
payment of or on account of the Principal Amount of this Debenture, for the
conversion of this Debenture and for all other purposes, and the Company shall
not be affected by any notice to the contrary. All such payments and such
conversions shall be valid and effectual to satisfy and discharge the liability
upon this Debenture to the extent of the sum or sums so paid or the conversion
or conversions so made.
SECTION 2.4 Repayment at Maturity. At the Maturity Date, the Company
shall repay the outstanding Principal Amount of this Debenture in whole in cash,
together with all accrued and unpaid interest thereon, in cash, to the Maturity
Date.
SECTION 2.5 Optional Redemption. During the period between 3 to 9
months from the date that the Registration Statement is declared effective, the
Company may redeem this Debenture, by notice to the Holder, for an amount equal
to 125% of the outstanding Principal Amount at such time. At anytime after 9
months from the date that the Registration Statement is declared effective, the
Company may redeem this Debenture, by notice to the Holder, for an amount equal
to 150% of the outstanding Principal Amount at such time.
ARTICLE 3
CONVERSION OF DEBENTURE
SECTION 3.1 Conversion; Conversion Price; Valuation Event. (a) At the
option of the Holder, this Debenture may be converted, either in whole or in
part, up to the full Principal Amount hereof (in increments of $1,000 in
Principal Amount) into Common Shares (calculated as to each such conversion to
the nearest 1/100th of a share), at any time and from time to time on any
Business Day, subject to compliance with Section 3.2. The number of Common
Shares into which this Debenture may be converted is equal to the principal
amount of the Debenture being converted multiplied by eleven, minus the product
of the Conversion Price multiplied by ten times the dollar amount of the
Debenture being converted, and the entire foregoing result shall be divided by
the Conversion Price. In addition, the Company shall pay to the Holder on the
Conversion Date, in cash, any accrued and unpaid interest on the principal
amount being converted. The "Conversion Price" shall be equal to the lesser of
(i) $0.25, or (ii) eighty percent (80%) (a "Discount Multiplier") of the average
of the 5 lowest volume weighted average prices during the twenty (20) Trading
Days prior to Holder's election to convert; provided, that in the event the
Registration Statement has not been declared effective by the SEC by the
Deadline or, if the Registration Statement has theretofore been declared
effective but is not thereafter effective, then the applicable Discount
Multiplier shall decrease by three percentage points (3%) for each month or
partial month occurring after the Deadline that the Registration Statement is
not effective.
Beginning in the first full calendar month after the Registration Statement is
declared effective, Holder shall convert at least 5%, but no more than 15% (such
15% maximum amount to be cumulative from the Deadline), of the face value of the
Debenture per calendar month into Common Shares of the Company, provided that
the Common Shares are available, registered and freely tradable. The 15% monthly
maximum amount shall not be applicable if the Current Market Price of the Common
Stock at anytime during the applicable month is higher than the Current Market
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Price of the Common Stock on the Closing Date. In the event Holder breaches this
provision, Holder shall not be entitled to collect interest on the Debenture for
that month.
(b) Notwithstanding the provisions of Section 3.1(a), in the event the
Company's Registration Statement has not been declared effective by the Deadline
or, if the Registration Statement has theretofore been declared effective but is
not thereafter effective; provided that this provision shall not apply if the
Company has filed the Registration Statement within 30 days of the Closing Date
and thereafter responds to all SEC comments within 10 business days of receipt
thereof, the following will also apply in addition to any damages incurred by
the Holder as a result thereof:
(i) The Holder may demand repayment of one hundred and
twenty-five percent (125%) of the Principal Amount of the Debenture,
together with all accrued and unpaid interest thereon, in cash, at any
time prior to the Company's Registration Statement being declared
effective by the SEC or during the period that the Company's
Registration Statement is not effective, such repayment to be made
within ten (10) business days of such demand. In the event that the
Debenture is so accelerated, in addition to the repayment of one
hundred and twenty-five percent (125%) of the Principal Amount together
with accrued interest as aforesaid, the Company shall immediately issue
to the Holder 50,000 Shares of Common Stock for each thirty (30) day
period, or portion thereof, during which the Principal Amount,
including interest thereon, remains unpaid, following demand therefor.
(ii) If the Holder does not elect to accelerate the Debenture,
the Company shall immediately issue to Holder 50,000 Shares of Common
Stock for each thirty (30) day period, or portion thereof, that the
Registration Statement is not effective.
SECTION 3.2 Exercise of Conversion Privilege. (a) Conversion of this
Debenture may be exercised on any Business Day by the Holder by telecopying an
executed and completed Conversion Notice to the Company. Each date on which a
Conversion Notice is telecopied to the Company in accordance with the provisions
of this Section 3.2 shall constitute a Conversion Date. The Company shall
convert this Debenture and issue the Common Stock Issued at Conversion in the
manner provided below in this Section 3.2, and all voting and other rights
associated with the beneficial ownership of the Common Stock Issued at
Conversion shall vest with the Holder, effective as of the Conversion Date at
the time specified in the Conversion Notice. The Conversion Notice also shall
state the name or names (with addresses) of the persons who are to become the
holders of the Common Stock Issued at Conversion in connection with such
conversion. As promptly as practicable after the receipt of the Conversion
Notice as aforesaid, but in any event not more than three (3) Business Days
after the Company's receipt of such Conversion Notice, the Company shall (i)
issue the Common Stock Issued at Conversion in accordance with the provisions of
this Article 3 and (ii) cause to be mailed for delivery by overnight courier, or
if a Registration Statement covering the Common Stock has been declared
effective by the SEC cause to be electronically transferred, to Holder (x) a
certificate or certificate(s) representing the number of Common Shares to which
the Holder is entitled by virtue of such conversion, (y) cash, as provided in
Section 3.3, in respect of any fraction of a Common Share deliverable upon such
conversion and (z) cash or shares of Common Stock, as applicable, representing
the amount of accrued and unpaid interest on this Debenture as of the Conversion
Date. Such conversion shall be deemed to have been effected at the time at which
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the Conversion Notice indicates (which shall not be prior to the time of
delivery of the Conversion Notice), and at such time the rights of the Holder of
this Debenture, as such (except if and to the extent that any Principal Amount
thereof remains unconverted), shall cease and the Person and Persons in whose
name or names the Common Stock Issued at Conversion shall be issuable shall be
deemed to have become the holder or holders of record of the Common Shares
represented thereby, and all voting and other rights associated with the
beneficial ownership of such Common Shares shall at such time vest with such
Person or Persons. The Conversion Notice shall constitute a contract between the
Holder and the Company, whereby the Holder shall be deemed to subscribe for the
number of Common Shares which it will be entitled to receive upon such
conversion and, in payment and satisfaction of such subscription (and for any
cash adjustment to which it is entitled pursuant to Section 3.4), to surrender
this Debenture and to release the Company from all liability thereon (except if
and to the extent that any Principal Amount thereof remains unconverted). No
cash payment aggregating less than $1.00 shall be required to be given unless
specifically requested by the Holder.
(b) If, at any time after the date of this Debenture, (i) the
Company challenges, disputes or denies, without cause, the right of the
Holder hereof to effect the conversion of this Debenture into Common
Shares or otherwise dishonors or rejects any Conversion Notice properly
delivered in accordance with this Section 3.2 or (ii) any law, ruling
or order is issued or promulgated pursuant to which Holder is
prohibited from converting the Debenture into Common Shares, then the
Holder shall have the right, by written notice to the Company, to
require the Company to promptly redeem this Debenture for cash at one
hundred and twenty-five (125%) of the Principal Amount thereof,
together with all accrued and unpaid interest thereon to the date of
redemption. Under any of the circumstances set forth above, the Company
shall be responsible for the payment of all costs and expenses of the
Holder, including reasonable legal fees and expenses, as and when
incurred in defending itself in any such action or pursuing its rights
hereunder (in addition to any other rights of the Holder).
(c) The Holder shall be entitled to exercise its conversion
privilege notwithstanding the commencement of any case under the
Bankruptcy Code. In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent
permitted any rights to relief it may have under 11 U.S.C. ss. 362 in
respect of the Holder's conversion privilege. The Company agrees,
without cost or expense to the Holder, to take or consent to any and
all action necessary to effectuate relief under 11 U.S.C. ss. 362.
SECTION 3.3 Fractional Shares. No fractional Common Shares or scrip
representing fractional Common Shares shall be delivered upon conversion of this
Debenture. Instead of any fractional Common Shares which otherwise would be
delivered upon conversion of this Debenture, the Company shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction
multiplied by the Current Market Price on the Conversion Date. No cash payment
of less than $1.00 shall be required to be given unless specifically requested
by the Holder.
SECTION 3.4 Adjustments. The Conversion Price and the number of shares
deliverable upon conversion of this Debenture are subject to adjustment from
time to time as follows:
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(i) Reclassification, Etc. In case the Company shall
reorganize its capital, reclassify its capital stock, consolidate or
merge with or into another Person (where the Company is not the
survivor or where there is a change in or distribution with respect to
the Common Stock of the Company), sell, convey, transfer or otherwise
dispose of all or substantially all its property, assets or business to
another Person, or effectuate a transaction or series of related
transactions in which more than fifty percent (50%) of the voting power
of the Company is disposed of (each, a "Fundamental Corporate Change")
and, pursuant to the terms of such Fundamental Corporate Change, shares
of common stock of the successor or acquiring corporation, or any cash,
shares of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property") are to be received by or
distributed to the holders of Common Stock of the Company, then the
Holder of this Debenture shall have the right thereafter, at its sole
option, to (x) require the Company to prepay this Debenture for cash at
one hundred and twenty-five percent (125%) of the Principal Amount
thereof, together with all accrued and unpaid interest thereon to the
date of prepayment, (y) upon conversion of the Debenture, receive the
number of shares of common stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and
Other Property as is receivable upon or as a result of such Fundamental
Corporate Change by a holder of the number of shares of Common Stock
into which the outstanding portion of this Debenture may be converted
at the Conversion Price applicable immediately prior to such
Fundamental Corporate Change or (z) require the Company, or such
successor, resulting or purchasing corporation, as the case may be, to,
without benefit of any additional consideration therefor, execute and
deliver to the Holder a debenture with substantial identical rights,
privileges, powers, restrictions and other terms as this Debenture in
an amount equal to the amount outstanding under this Debenture
immediately prior to such Fundamental Corporate Change. For purposes
hereof, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred
as to dividends or assets over any other class of stock of such
corporation and which is not subject to prepayment and shall also
include any evidences of indebtedness, shares of stock or other
securities which are convertible into or exchangeable for any such
stock, either immediately or upon the arrival of a specified date or
the happening of a specified event and any warrants or other rights to
subscribe for or purchase any such stock. The foregoing provisions
shall similarly apply to successive Fundamental Corporate Changes.
SECTION
3.5 Certain Conversion Limits.
Notwithstanding anything herein to the contrary, if and to the extent
that, on any date, the holding by the Holder of this Debenture would result in
the Holder's being deemed the beneficial owner of more than 4.9% of the then
Outstanding shares of Common Stock, then the Holder shall not have the right,
and the Company shall not have the obligation, to convert any portion of this
Debenture as shall cause such Holder to be deemed the beneficial owner of more
than 4.9% of the then Outstanding shares of Common Stock. If any court of
competent jurisdiction shall determine that the foregoing limitation is
ineffective to prevent a Holder from being deemed the beneficial owner of more
than 4.9% of the then Outstanding shares of Common Stock, then the Company shall
promptly prepay such portion of this Debenture as shall cause such Holder to be
deemed the beneficial owner of more than 4.9% of the then Outstanding shares of
Common Stock. Upon such determination by a court of competent jurisdiction, the
Holder shall have no interest in or rights under such portion of the Debenture.
Any and all interest paid on or prior to the date of such determination shall be
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deemed interest paid on the remaining portion of this Debenture held by the
Holder. Such prepayment shall be for cash at a prepayment price of one hundred
and twenty-five percent (125%) of the Principal Amount thereof, together with
all accrued and unpaid interest thereon to the date of prepayment.
SECTION 3.6 Surrender of Debentures. Upon any redemption of this
Debenture pursuant to Sections 3.2, 3.5 or 6.2, or upon maturity pursuant to
Section 2.4, the Holder shall either deliver this Debenture by hand to the
Company at its principal executive offices or surrender the same to the Company
at such address by nationally recognized overnight courier. Payment of the
redemption price or the amount due on maturity specified in Section 2.4, shall
be made by the Company to the Holder against receipt of this Debenture (as
provided in this Section 3.5) by wire transfer of immediately available funds to
such account(s) as the Holder shall specify by written notice to the Company. If
payment of such redemption price is not made in full by the redemption date, or
the amount due on maturity is not paid in full by the Maturity Date, the Holder
shall again have the right to convert this Debenture as provided in Article 3
hereof or to declare an Event of Default.
ARTICLE 4
STATUS; RESTRICTIONS ON TRANSFER
SECTION 4.1 Status of Debenture. This Debenture constitutes a legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms subject, as to enforceability, to general principles of equity and to
principles of bankruptcy, insolvency, reorganization and other similar laws of
general applicability relating to or affecting creditors' rights and remedies
generally.
SECTION 4.2 Restrictions on Transfer. This Debenture, and any Common
Shares deliverable upon the conversion hereof, have not been registered under
the Securities Act. The Holder by accepting this Debenture agrees that this
Debenture and the shares of Common Stock to be acquired as interest on and upon
conversion of this Debenture may not be assigned or otherwise transferred unless
and until (i) the Company has received the opinion of counsel for the Holder
that this Debenture or such shares may be sold pursuant to an exemption from
registration under the Securities Act or (ii) a registration statement relating
to this Debenture or such shares has been filed by the Company and declared
effective by the SEC.
Each certificate for shares of Common Stock deliverable hereunder shall
bear a legend as follows unless and until such securities have been sold
pursuant to an effective registration statement under the Securities Act:
"The securities represented by this certificate have
not been registered under the Securities Act of 1933,
as amended (the "Securities Act"). The securities may
not be offered for sale, sold or otherwise
transferred except (i) pursuant to an effective
registration statement under the Securities Act or
(ii) pursuant to an exemption from registration under
the Securities Act in respect of which the issuer of
this certificate has received an opinion of counsel
satisfactory to the issuer of this certificate to
such effect. Copies of the agreement covering both
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the purchase of the securities and restrictions on
their transfer may be obtained at no cost by written
request made by the holder of record of this
certificate to the Secretary of the issuer of this
certificate at the principal executive offices of the
issuer of this certificate."
ARTICLE 5
COVENANTS
SECTION 5.1 Conversion. The Company shall cause the transfer agent, not
later than three (3) Business Days after the Company's receipt of a Conversion
Notice, to issue and deliver to the Holder the requisite shares of Common Stock
Issued at Conversion. Such delivery shall be by electronic transfer if a
Registration Statement covering the Common Stock has been declared effective by
the SEC. SECTION 5.2 Notice of Default. If any one or more events occur which
constitute or which, with notice, lapse of time, or both, would constitute an
Event of Default, the Company shall forthwith give notice to the Holder,
specifying the nature and status of the Event of Default or such other event(s),
as the case may be.
SECTION 5.3 Payment of Obligations. So long as this Debenture shall be
outstanding, the Company shall pay, extend, or discharge at or before maturity,
all its respective material obligations and liabilities, including, without
limitation, tax liabilities, except where the same may be contested in good
faith by appropriate proceedings.
SECTION 5.4 Compliance with Laws. So long as this Debenture shall be
outstanding, the Company shall comply with all applicable laws, ordinances,
rules, regulations and requirements of governmental authorities, except for such
noncompliance which would not have a material adverse effect on the business,
properties, prospects, condition (financial or otherwise) or results of
operations of the Company and the Subsidiaries.
SECTION 5.5 Inspection of Property, Books and Records. So long as this
Debenture shall be outstanding, the Company shall keep proper books of record
and account in which full, true and correct entries shall be made of all
material dealings and transactions in relation to its business and activities
and shall permit representatives of the Holder at the Holder's expense to visit
and inspect any of its respective properties, to examine and make abstracts from
any of its respective books and records, not reasonably deemed confidential by
the Company, and to discuss its respective affairs, finances and accounts with
its respective officers and independent public accountants, all at such
reasonable times and as often as may reasonably be desired.
ARTICLE 6
REMEDIES
SECTION 6.1 Events of Default. "Event of Default" wherever used herein
means any one of the following events:
(i) the Company shall default in the payment of principal of
or interest on this Debenture as and when the same shall be due and
payable and, in the case of an interest payment default, such default
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shall continue for five (5) Business Days after the date such interest
payment was due, or the Company shall fail to perform or observe any
other material covenant, agreement, term, provision, undertaking or
commitment under this Debenture, the Conversion Warrants (as defined in
the Securities Purchase Agreement), the Securities Purchase Agreement
or the Registration Rights Agreement and such default shall continue
for a period of ten (10) Business Days after the delivery to the
Company of written notice that the Company is in default hereunder or
thereunder;
(ii) any of the representations or warranties made by the
Company herein, in the Securities Purchase Agreement, the Registration
Rights Agreement or in any certificate or financial or other written
statements heretofore or hereafter furnished by or on behalf of the
Company in connection with the execution and delivery of this
Debenture, the Warrant issued together with the Debenture, the
Securities Purchase Agreement or the Registration Rights Agreement
shall be false or misleading in a material respect on the Closing Date;
(iii) under the laws of any jurisdiction not otherwise covered
by clauses (iv) and (v) below, the Company or any Subsidiary (A)
becomes insolvent or generally not able to pay its debts as they become
due to an extent materially adversely different than as of the date
hereof, (B) admits in writing its inability to pay its debts generally
or makes a general assignment for the benefit of creditors, (C)
institutes or has instituted against it any proceeding seeking (x) to
adjudicate it a bankrupt or insolvent, (y) liquidation, winding-up,
reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors including any plan of
compromise or arrangement or other corporate proceeding involving or
affecting its creditors or (z) the entry of an order for relief or the
appointment of a receiver, trustee or other similar person for it or
for any substantial part of its properties and assets, and in the case
of any such official proceeding instituted against it (but not
instituted by it), either the proceeding remains undismissed or
unstayed for a period of sixty (60) calendar days, or any of the
actions sought in such proceeding (including the entry of an order for
relief against it or the appointment of a receiver, trustee, custodian
or other similar official for it or for any substantial part of its
properties and assets) occurs or (D) takes any corporate action to
authorize any of the above actions;
(iv) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company or any Subsidiary a
bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under the Bankruptcy Code or any other
applicable Federal or state law, or appointing a receiver, liquidator,
assignee, trustee or sequestrator (or other similar official) of the
Company or of any substantial part of its property, or ordering the
winding-up or liquidation of its affairs, and any such decree or order
continues and is unstayed and in effect for a period of sixty (60)
calendar days;
(v) the institution by the Company or any Subsidiary of
proceedings to be adjudicated a bankrupt or insolvent, or the consent
by it to the institution of bankruptcy or insolvency proceedings
against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under the Bankruptcy Code or any other
applicable federal or state law, or the consent by it to the filing of
any such petition or to the appointment of a receiver, liquidator,
assignee, trustee
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or sequestrator (or other similar official) of the Company or of any
substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as and when they become due, or
the taking of corporate action by the Company in furtherance of any
such action;
(vi) a final judgment or final judgments for the payment of
money shall have been entered by any court or courts of competent
jurisdiction against the Company and remains undischarged for a period
(during which execution shall be effectively stayed) of thirty (30)
days, provided that the aggregate amount of all such judgments at any
time outstanding (to the extent not paid or to be paid, as evidenced by
a written communication to that effect from the applicable insurer, by
insurance) exceeds One Hundred Thousand Dollars ($100,000);
(vii) it becomes unlawful for the Company to perform or comply
with its obligations under this Debenture, the Conversion Warrant, the
Securities Purchase Agreement or the Registration Rights Agreement in
any respect;
(viii) the Common Shares shall be delisted from the NASDAQ
OTCBB (the "Trading Market" or, to the extent the Company becomes
eligible to list its Common Stock on any other national security
exchange or quotation system, upon official notice of listing on any
such exchange or system, as the case may be, it shall be the "Trading
Market") or suspended from trading on the Trading Market, and shall not
be reinstated, relisted or such suspension lifted, as the case may be,
within five (5) days or;
(ix) the Company shall default (giving effect to any
applicable grace period) in the payment of principal or interest as and
when the same shall become due and payable, under any indebtedness,
individually or in the aggregate, of more than One Hundred Thousand
Dollars ($100,000) (other than a default under those Secured
Convertible Debentures with AJW Partners, LLC, AJW Offshore, Ltd. and
AJW Qualified Partners, LLC due to the failure of La Jolla Cove
Investors, Inc. to deliver payment therefor, on behalf of the Company,
when due);
SECTION 6.2 Acceleration of Maturity; Rescission and Annulment. If an
Event of Default occurs and is continuing, then and in every such case the
Holder may, by a notice in writing to the Company, rescind any outstanding
Conversion Notice and declare that all amounts owing or otherwise outstanding
under this Debenture are immediately due and payable and upon any such
declaration this Debenture shall become immediately due and payable in cash at a
price of one hundred and twenty-five percent (125%) of the Principal Amount
thereof, together with all accrued and unpaid interest thereon to the date of
payment; provided, however, in the case of any Event of Default described in
clauses (iii), (iv), (v) or (vii) of Section 6.1, such amount automatically
shall become immediately due and payable without the necessity of any notice or
declaration as aforesaid.
SECTION 6.3 Late Payment Penalty. If any portion of the principal of or
interest on this Debenture shall not be paid within ten (10) days of when it is
due, the Discount Multiplier under this Debenture, and under all warrants
granted by the Company to the Holder, shall decrease by an aggregate of one
percentage point (1%) for all conversions of this Debenture and warrant
exercises thereafter.
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SECTION 6.4 Maximum Interest Rate. Notwithstanding anything herein to
the contrary, if at any time the applicable interest rate as provided for herein
shall exceed the maximum lawful rate which may be contracted for, charged, taken
or received by the Holder in accordance with any applicable law (the "Maximum
Rate"), the rate of interest applicable to this Debenture shall be limited to
the Maximum Rate. To the greatest extent permitted under applicable law, the
Company hereby waives and agrees not to allege or claim that any provisions of
this Note could give rise to or result in any actual or potential violation of
any applicable usury laws.
SECTION 6.5 Remedies Not Waived. No course of dealing between the
Company and the Holder or any delay in exercising any rights hereunder shall
operate as a waiver by the Holder.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1 Notice of Certain Events. In the case of the occurrence of
any event described in Section 3.4 of this Debenture, the Company shall cause to
be mailed to the Holder of this Debenture at its last address as it appears in
the Company's security registry, at least twenty (20) days prior to the
applicable record, effective or expiration date hereinafter specified (or, if
such twenty (20) days' notice is not possible, at the earliest possible date
prior to any such record, effective or expiration date), a notice thereof,
including, if applicable, a statement of (y) the date on which a record is to be
taken for the purpose of such dividend, distribution, issuance or granting of
rights, options or warrants, or if a record is not to be taken, the date as of
which the holders of record of Common Stock to be entitled to such dividend,
distribution, issuance or granting of rights, options or warrants are to be
determined or (z) the date on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding-up is expected to
become effective, and the date as of which it is expected that holders of record
of Common Stock will be entitled to exchange their shares for securities, cash
or other property deliverable upon such reclassification, consolidation, merger,
sale transfer, dissolution, liquidation or winding-up.
SECTION 7.2 Register. The Company shall keep at its principal office a
register in which the Company shall provide for the registration of this
Debenture. Upon any transfer of this Debenture in accordance with Articles 2 and
4 hereof, the Company shall register such transfer on the Debenture register.
SECTION 7.3 Withholding. To the extent required by applicable law, the
Company may withhold amounts for or on account of any taxes imposed or levied by
or on behalf of any taxing authority in the United States having jurisdiction
over the Company from any payments made pursuant to this Debenture.
SECTION 7.4 Transmittal of Notices. Except as may be otherwise provided
herein, any notice or other communication or delivery required or permitted
hereunder shall be in writing and shall be delivered personally, or sent by
telecopier machine or by a nationally recognized overnight courier service, and
shall be deemed given when so delivered personally, or by telecopier machine or
overnight courier service as follows:
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(1) if to the Company, to:
Peabodys Coffee, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx 0
Xxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
(2) if to the Holder, to:
La Jolla Cove Investors, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Each of the Holder or the Company may change the foregoing address by notice
given pursuant to this Section 7.4.
SECTION 7.5 Attorneys' Fees. Should any party hereto employ an attorney
for the purpose of enforcing or construing this Debenture, or any judgment based
on this Debenture, in any legal proceeding whatsoever, including insolvency,
bankruptcy, arbitration, declaratory relief or other litigation, the prevailing
party shall be entitled to receive from the other party or parties thereto
reimbursement for all reasonable attorneys' fees and all reasonable costs,
including but not limited to service of process, filing fees, court and court
reporter costs, investigative costs, expert witness fees, and the cost of any
bonds, whether taxable or not, and that such reimbursement shall be included in
any judgment or final order issued in that proceeding. The "prevailing party"
means the party determined by the court to most nearly prevail and not
necessarily the one in whose favor a judgment is rendered.
SECTION 7.6 Governing Law. This Debenture shall be governed by, and
construed in accordance with, the laws of the State of California (without
giving effect to conflicts of laws principles). With respect to any suit, action
or proceedings relating to this Debenture, the Company irrevocably submits to
the exclusive jurisdiction of the courts of the State of California sitting in
San Diego and the United States District Court located in the City of San Diego
and hereby waives, to the fullest extent permitted by applicable law, any claim
that any such suit, action or proceeding has been brought in an inconvenient
forum. Subject to applicable law, the Company and Holder agree that final
judgment against it in any legal action or proceeding arising out of or relating
to this Debenture shall be conclusive and may be enforced in any other
jurisdiction within or outside the United States by suit on the judgment, a
certified copy of which judgment shall be conclusive evidence thereof and the
amount of its indebtedness, or by such other means provided by law.
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SECTION 7.7 Waiver of Jury Trial. To the fullest extent permitted by
law, each of the parties hereto hereby knowingly, voluntarily and intentionally
waives its respective rights to a jury trial of any claim or cause of action
based upon or arising out of this Debenture or any other document or any
dealings between them relating to the subject matter of this Debenture and other
documents. Each party hereto (i) certifies that neither of their respective
representatives, agents or attorneys has represented, expressly or otherwise,
that such party would not, in the event of litigation, seek to enforce the
foregoing waivers and (ii) acknowledges that it has been induced to enter into
this Debenture by, among other things, the mutual waivers and certifications
herein.
SECTION 7.8 Headings. The headings of the Articles and Sections of this
Debenture are inserted for convenience only and do not constitute a part of this
Debenture.
SECTION 7.9 Payment Dates. Whenever any payment hereunder shall be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
SECTION 7.10 Binding Effect. Each Holder by accepting this Debenture
agrees to be bound by and comply with the terms and provisions of this
Debenture.
SECTION 7.11 No Stockholder Rights. Except as otherwise provided
herein, this Debenture shall not entitle the Holder to any of the rights of a
stockholder of the Company, including, without limitation, the right to vote, to
receive dividends and other distributions, or to receive any notice of, or to
attend, meetings of stockholders or any other proceedings of the Company, unless
and to the extent converted into shares of Common Stock in accordance with the
terms hereof.
SECTION 7.12 Facsimile Execution. Facsimile execution shall be deemed
originals.
IN WITNESS WHEREOF, the Company has caused this Debenture to be signed
by its duly authorized officer on the date of this Debenture.
Peabodys Coffee, Inc.
By:
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Title:
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EXHIBIT A
DEBENTURE CONVERSION NOTICE
TO: Peabodys Coffee, Inc.
The undersigned owner of this 8 % Convertible Debenture due December
___, 2005 (the "Debenture") issued by Peabodys Coffee, Inc. (the "Company")
hereby irrevocably exercises its option to convert $__________ Principal Amount
of the Debenture into shares of Common Stock in accordance with the terms of the
Debenture. The undersigned hereby instructs the Company to convert the portion
of the Debenture specified above into shares of Common Stock Issued at
Conversion in accordance with the provisions of Article 3 of the Debenture. The
undersigned directs that the Common Stock and certificates therefor deliverable
upon conversion, the Debenture reissued in the Principal Amount not being
surrendered for conversion hereby, [the check or shares of Common Stock in
payment of the accrued and unpaid interest thereon to the date of this Notice,]
together with any check in payment for fractional Common Stock, be registered in
the name of and/or delivered to the undersigned unless a different name has been
indicated below. All capitalized terms used and not defined herein have the
respective meanings assigned to them in the Debenture. The conversion pursuant
hereto shall be deemed to have been effected at the date and time specified
below, and at such time the rights of the undersigned as a Holder of the
Principal Amount of the Debenture set forth above shall cease and the Person or
Persons in whose name or names the Common Stock Issued at Conversion shall be
registered shall be deemed to have become the holder or holders of record of the
Common Shares represented thereby and all voting and other rights associated
with the beneficial ownership of such Common Shares shall at such time vest with
such Person or Persons.
Date and time:
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By:
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Title:
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Fill in for registration of Debenture:
Please print name and address (including ZIP
code number):
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